BCH Banco de Chile

A high-level executive at Latin America's largest shipping company in terms of revenue, Chile's Compania Sudamericana de Vapores SA (VAPORES.SN), said the company won't go bankrupt despite recent financial troubles that have led to market speculation it could fail.

Vapores, whose finances have been weighed down by hefty ship and container leasing fees, as well as rising international crude oil prices, is looking to stanch its financial hemorrhaging through a $500 million capital increase and the listing of up to 49% of its SAAM ports unit. The SAAM stock market listing is expected to fetch another $500 million.

"Vapores going bankrupt is an option that can be completely dismissed," Vapores Vice President Arturo Claro told Dow Jones Newswires. "The main reason behind Vapores' crisis is basically that it doesn't have enough capital for its volume of operations," said Claro, a member of the family that controls the company.

The company's shares had plummeted 57% this year as investors fretted over its deep financial problems which led to the resignation of the president of its board of directors.

Earlier this week, the local Luksic family, which controls London-listed mining company Antofagasta PLC (ANTO.LN), brewer Compania Cervecerias Unidas SA (CCU, CCU.SN), and Chile's second-largest bank Banco de Chile (BCH, CHILE.SN), bought a 10% stake in Vapores for $120.3 million, leading to a 30% surge in the share price.

The Luksic family "will be of great value to the future development of the company," Claro said.

The Luksic purchase, plus a planned $66 million capital increase by holding company Maritima de Inversiones SA (MARINSA.SN), which is controlled by the Claro family and has a 38% controlling stake in the shipping firm, will help "seal the success" of Vapores' $500 million capital increase, Claro said.

Analysts agree that the Claro family, through its holding company, will now be able to subscribe to the $500 million capital increase.

"While the Claro family had hinted before that Marinsa would subscribe to its share of the next capital increase, this solves the mystery about the funding," local investment bank Celfin Capital said.

The shipper isn't in the clear yet, however, and may face losses of nearly $100 million in the first quarter as it needs to meet leasing payments of some $435 million this year and $2.55 billion over the next five years.

"Nearly 85% of the ships Vapores has are leased, while its competition leases about 60% of the ships they use," local brokerage EuroAmerica said.

With the $1 billion Vapores expects to garner through the capital increase and the SAAM listing, "we're going to have ships built, which will replace a large part of the ships we currently lease, thus greatly reducing our variable operation costs," Claro said.

Vapores will also use the funds to buy containers, which are expensive to lease, he added.

Claro points out that in the first quarter of 2010 Vapores posted a loss of $38.4 million, but ended the year with a net profit of $170.8 million as shipping traffic generally picks up after March.

-By Anthony Esposito, Dow Jones Newswires; 56-2-715-8929; anthony.esposito@dowjones.com

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